Real Estate Finance
Instruments and priorities
Separate the promise from the security. The note is the borrower's negotiable promise to pay; the mortgage is the lien that secures it. Ohio is a lien-theory state - the borrower keeps title and the lender holds a lien - and foreclosure is judicial, ending in a sheriff's sale that requires court confirmation; the borrower may generally redeem until confirmation. Priority follows recording order, with the purchase-money mortgage typically beating earlier judgments against the buyer, and subordination agreements reordering lien position by contract.
The numbers candidates must handle
PITI, loan-to-value, points (one point equals one percent of the loan), amortization, and ARM rate caps. Private mortgage insurance under the federal Homeowners Protection Act terminates automatically at 78 percent of original value on the amortization schedule and is cancellable at the borrower's request at 80 percent based on current value. Escrow accounting limits the lender's cushion to roughly one-sixth of annual disbursements.
Disclosure and licensing
TRID governs timing: the Loan Estimate within three business days of application and the Closing Disclosure at least three business days before consummation. RESPA Section 8 bans fee splitting and unearned referral fees, with a limited safe harbor for affiliated business arrangements that disclose the relationship. In Ohio, non-bank mortgage brokers and lenders are licensed under the Residential Mortgage Lending Act, while banks and credit unions are exempt.
Worked example
A $240,000 loan at 78 percent equals $187,200 - the principal balance at which PMI must automatically terminate. Trap: questions swap 78 percent (automatic, original value) with 80 percent (borrower request).